Corporate disclosure for Cap-and-Trade needs fixing

By CMTA Staff

Capitol Update, July 25, 2014 Share this on FacebookTweet thisEmail this to a friend

This week a dozen companies and associations, including CMTA, told Air Resources Board (ARB) Mary Nichols that the Board should issue a “regulatory advisory” suspending three new disclosure requirements in the cap-and-trade regulations.

The three provisions require registrants to disclose (1) the worldwide corporate associations of the registered entity, even if such affiliates are not registered with the cap-and-trade program, (2) certain investigations undertaken at any time in the past 10 years in connection with such worldwide affiliates, and (3) the outside counsels advising registrants on how to comply with the program. The information is being requested to support ARB oversight of the market to detect market manipulation.

There is widespread concern over these requirements because most companies simply do not keep the necessary internal records to track investigations over the past 10 years affecting any worldwide affiliate. Also, although some companies may be able to locate the names of their hundreds or thousands of worldwide affiliates, they do not necessarily have all the information required to be disclosed by the regulations (e.g., federal tax Employer Identification Number, place and date of incorporation), let alone the systems permitting an update of such disclosures at the frequency contemplated by the regulation. Finally, most companies still fail to see the value to ARB of receiving this massive amount of data outside a discovery request in an ongoing investigation by ARB of alleged market manipulation.

The coalition letter sent to Nichols noted that certain companies may not be able to comply with the new disclosure requirements by the applicableJuly 31 deadline. Inability to comply could potentially expose these companies to enforcement actions. In the long-term, there is concern that the inability to comply with the disclosure obligation on investigations of affiliates will prevent such companies from participating in future cap-and-trade allowance auctions.

The letter requests a suspension of the application and enforcement of the new requirements through a Regulatory Advisory to give industry more time to comply and, hopefully, work with staff on appropriate amendments to the regulations and clarifications through additional guidance. 

Read more Energy articles

Capitol updates archive 989898989